India orders probe into Finmeccanica copter deal

AP News

2/26/2013 4:37:04 AM - AP News

NEW DELHI (AP) — India's top investigative agency is looking into the role a former air force chief played in a $750 million helicopter contract marred by reports of bribery.

Shashi Tyagi and three of his cousins are among 11 people and two companies at the center of a preliminary inquiry announced Monday by the Central Bureau of Investigation. The CBI, India's equivalent of the FBI, is investigating whether kickbacks were paid to steer the contract to Italian defense group Finmeccanica's helicopter division, AgustaWestland.

The inquiry is based on documents that Indian investigators received from Italian authorities following the arrest two weeks ago of Giuseppe Orsi, the CEO of Finmeccanica, in Italy on charges that the company paid bribes in India. Orsi, who has been jailed, denies wrongdoing.

The inquiry is the first formal step by Indian investigators into allegations that bribes clinched the purchase of 12 helicopters two years ago. India's defense ministry received three of the helicopters in December but has placed the rest of the contract on hold.

The ministry has threatened to cancel the deal unless Finmeccanica gives assurances that no bribes were paid.

People to be questioned by the bureau include Tyagi, his cousins, Orsi and Spagnolini. Tyagi, who led the air force from 2005 until his retirement in 2007, has said he is innocent.

The agency said it would also investigate allegations that three middlemen channeled illegal payments through Tunisia and Mauritius to two India-based companies. Those companies and two Indian men associated with them also are under investigation.

Only after the agency completes questioning the suspects and gathering evidence can it pursue criminal cases.

India is expected to spend $80 billion over the next 10 years to upgrade its military. It has become the world's top arms and defense equipment buyer in recent years due to its concerns about China's growing power in the region and its traditional rivalry with neighbor Pakistan.

Arms deals in India have often been mired in controversy, with allegations that companies have paid millions of dollars in kickbacks to Indian officials to procure lucrative contracts.

In the 1980s, then-Prime Minister Rajiv Gandhi's government collapsed over charges that Swedish gun manufacturer Bofors AB paid bribes to supply Howitzer field guns to the Indian army.

Following the Bofors scandal, India banned middlemen in all defense deals.